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Bill Dudley: The Fed Thinks It’s Fighting Inflation. Think Again.

Even at more than 5.25%, the central bank’s short-term interest-rate target might not be high enough to cool the economy. To a large and under-appreciated extent, the job of the US Federal Reserve entails chasing an elusive number: r*, or the neutral short-term interest rate. When the Fed’s target rate is above r*, it should restrict growth.

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Posted: May 30, 2024 Thursday 06:00 AM